20 Aug North Carolina and Washington Legislative Update
The North Carolina legislature recently amended the North Carolina Condominium Act and the North Carolina Planned Community Act with regard to nonjudicial foreclosure proceedings, and the State of Washington’s legislature amended its laws governing debt collection practices. Both states’ legislation is effective October 1, 2013.
NORTH CAROLINA HOUSE BILL 331
The following provisions and procedures will be applicable to and complied with in every nonjudicial power of sale foreclosure of a claim of lien, and these provisions and procedures will control to the extent they are inconsistent or in conflict with the provisions of North Carolina law governing sales under the power of sale:
- The condominium or planned community association (“association”) will have a power of sale for purposes of the enforcement of its claim of lien.
- After the association has filed a claim of lien and prior to the commencement of a nonjudicial foreclosure, the association must give to the unit owner notice of the association’s intention to commence a nonjudicial foreclosure to enforce its claim of lien. The notice must contain a detailed written statement of the amount of principal, interest, and any other fees, expenses, and disbursements that the association in good faith is claiming to be due as of the date of the written statement, together with a daily interest charge based on the contract rate as of the date of the written statement.
- The association must appoint a trustee to conduct the nonjudicial foreclosure proceeding and sale. The appointment of the trustee must be included in the claim of lien or in a separate instrument filed with the office of the clerk of court in the county in which the unit is located as an exhibit to the notice of hearing. The association, at its option, may from time to time remove a trustee previously appointed and appoint a successor trustee by filing a Substitution of Trustee with the clerk of court in the foreclosure proceeding. Counsel for the association may be appointed by the association to serve as the trustee and may serve in that capacity as long as the unit owner does not contest the obligation to pay the amount of any sums due the association, or the validity, enforcement, or foreclosure of the claim of lien. Any appointed trustee will have the same fiduciary duties and obligations as a trustee in the foreclosure deed of trust.
- If a valid debt, default, and notice to those entitled to receive such notice under the power of sale law are found to exist, then the clerk of court will authorize the sale of the property described in the claim of lien by the trustee.
- If prior to foreclosure, the unit owner satisfies the debt secured by the claim of lien and pays all expenses and costs incurred in filing and enforcing the association assessment lien, including, but not limited to, advertising costs, attorneys’ fees, and the trustee’s commission, then the trustee will dismiss the foreclosure action and the association must cancel the claim of lien of record. The unit owner will have rights granted under the satisfaction provisions of North Carolina law to ensure the association’s satisfaction of the claim of lien.
- Any person, other than the trustee, may bid at the foreclosure sale. Unless prohibited in the declaration or bylaws, the association may bid on the unit at a foreclosure sale directly or through an agent. If the association or its agent is the high bidder at the sale, the trustee must allow the association to pay the costs and expenses of the sale and apply a credit against the sums due by the unit owner to the association in lieu of paying the bid price in full.
- The trustee will be entitled to a commission for services rendered, which will include fees, costs, and expenses reasonably incurred by the trustee in connection with the foreclosure whether or not a sale is held. The trustee’s commission will be paid without regard to any limitations on compensation otherwise provided by law, including, without limitation, the provisions of North Carolina law governing trustee’s fee.
- If the unit owner does not contest the obligation to pay or the amount of any sums due the association or the validity, enforcement, or foreclosure of the claim of lien at any time after the expiration of the 15-day period following notice, then attorneys’ fees and trustee’s commission collectively charged to the unit owner must not exceed $1,200, not including costs or expenses incurred. The obligation to pay and the amount of any sums due the association and the validity, enforcement, or foreclosure of the claim of lien remains uncontested as long as the unit owner does not dispute, contest, or raise any objection, defense, offset, or counterclaim as to the amount or validity of any portion of the sums claimed due by the association or the validity, enforcement, or foreclosure of the claim of lien. Any judgment, decree, or order in any action brought will include costs and reasonable attorneys’ fees for the prevailing party.
- Unit owners will be deemed to have the rights and remedies available to borrowers to enjoin the sale.
The above provisions do not prohibit or prevent an association from pursuing judicial foreclosure of a claim of lien, from taking other actions to recover the sums due the association, or from accepting a deed in lieu of foreclosure. Any collection of assessments will include an award of costs and reasonable attorneys’ fees to the prevailing party, which will not be subject to the $1,200 limitation.
All nonjudicial foreclosure proceedings commenced by an association before October 1, 2013, and all sales and transfers of real property as part of those proceedings under North Carolina law or contained in the declaration of the condominium or planed community are declared to be valid unless an action to set aside the foreclosure is commenced on or before October 1, 2013, or within 1 year after the date of the sale, whichever occurs last.
WASHINGTON HOUSE BILL 1822
The definition of a “collection agency” now includes any person or entity that is engaged in the business of purchasing delinquent or charged off claims for collection purposes, whether it collects the claims itself or hires a third party for collection or an attorney for litigation in order to collect the claims.